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Pension Inquiry Reveals a Power Broker’s Web

Hank Morris in 2001, the year he ran Alan G. Hevesis unsuccessful mayoral campaign.Credit
Sara Krulwich/The New York Times

Top executives at Bear Stearns were surprised when word came down from the chief, James E. Cayne, that it was time to hire a new company to produce the annual report to shareholders.

Mr. Cayne was very specific: It should be the one owned by Hank Morris, a political confidant of Alan G. Hevesi, the up-and-coming New York City comptroller who held sway over municipal bond work sought by Bear Stearns. Lunch with Mr. Morris was arranged, and soon his graphic-design firm, Curran & Connors, replaced the longtime producer of Bear’s reports — only to be dropped a few years later, when Mr. Hevesi was no longer in office.

Though fleeting, Mr. Morris’s work about 10 years ago for Bear, the now-defunct Wall Street investment house, offers an early, inside glimpse of how he became a pre-eminent practitioner of the art of access capitalism. Over the years, his public profile was that of a leading New York campaign consultant — a guru sought after by marquee Democrats nationwide. But below the radar, Mr. Morris increasingly gravitated toward more lucrative activities, parlaying his political relationships to bolster a portfolio of private business interests.

Today, Mr. Morris, 55, stands accused of crossing the often-blurry line separating the legitimate use and illegal abuse of influence. A 123-count state indictment handed up in March asserts that he positioned himself to extract $15 million in kickbacks from fund managers seeking public pension business in New York after he helped get Mr. Hevesi elected state comptroller in 2002. Mr. Morris has pleaded not guilty.

The case has reignited perennial questions about a nationwide network of pension investment brokers, or placement agents — many of them from the world of political operatives. Inquiries are under way in more than 30 states.

While Mr. Morris’s role as a pension-fund middleman may have been his most brazen and lucrative, it built on previous ventures that included several corporate directorships, the annual-report designer Curran & Connors, and his political consulting firm, Morris & Carrick.

Mr. Morris’s multifaceted role at eSpeed, a brokerage-trades processor, is an example of the synergy created by his various enterprises. It appointed Mr. Morris to its board, retained Morris & Carrick and Curran & Connors as consultants and obtained pension investments and a service contract from the New York State comptroller’s office. Asked during an employment lawsuit by a former Curran & Connors worker to explain how he drummed up business, Mr. Morris offered a simple explanation.

“I know a lot of people,” he said.

Mr. Morris’s indictment, if nothing else, serves as a lesson in the dangers of trading on relationships made in the trenches of elective politics.

“The temptations are huge,” said Hank Sheinkopf, a political strategist often called “the other Hank” in the clubby precincts of New York politics. “If you have any stature at all, you’re always asked to leverage your connections.”

Few of Mr. Morris’s close colleagues agreed to speak about him on the record for fear of being drawn into the pension-fund investigations. Early this month, the New York attorney general, Andrew M. Cuomo, announced that he had issued more than 100 subpoenas to lobbyists, consultants and others, further stoking anxiety among those who have moved in Mr. Morris’s circle. Mr. Morris’s lawyer, William J. Schwartz, did not respond to messages.

A graduate of Columbia University’s law school, with a shock of white hair and preference for preppy-looking sweaters even in summer, Mr. Morris had disarming mannerisms that cloaked a brass-knuckled way of doing business. He rose from a job as a legislative assistant in Albany in the 1970s to become an architect of Representative Charles E. Schumer’s upset victory over Senator Alfonse M. D’Amato in 1998. It was the defining moment in his career, but he also worked with some other big names in Democratic politics, former President Bill Clinton and Senator Dianne Feinstein of California among them.

He had an unusually close relationship with Mr. Hevesi, whom he had known since the latter’s days as a Queens assemblyman 30 years ago. A New York Times article in 2001, when Mr. Morris managed Mr. Hevesi’s ill-fated run for mayor, noted that it was not uncommon for aides to other candidates to mistakenly refer to Mr. Hevesi as “Hank,” and that the two men shared a bond formed by difficult campaigns, such that “Mr. Morris’s voice gets shaky and his eyes watery as he talks about Mr. Hevesi.”

Although Mr. Morris continued working for Mr. Hevesi’s campaigns over the years, several longtime associates said he seemed to drift away from political consulting after the Schumer triumph.

“This was a guy who used to be there late at night stuffing envelopes,” said one colleague. “But over time his patience for dealing with campaigns and the realities of modern campaign consulting just evaporated. He just seemed to lose interest in it.”

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Mr. Morris was also shifting gears in his personal life. He married in 2001 and bought a $4 million Hamptons house. It is unclear how much money Mr. Morris was making during that time, but he had taken steps beginning in the 1990s to broaden his sources of income. Friends said he may have been influenced by the experience of his former consulting partner, Philip Friedman, who had become wealthy doing campaign work but never recovered from the 1987 stock market crash.

Mr. Morris joined the boards of at least two public companies, eSpeed and CDSI Holdings, a data-services firm, and in 1996, gathered a small group of friends to buy Curran & Connors, a Long Island business that designs corporate annual reports and Web sites. Among his fellow investors were Bill Carrick, his partner in Morris & Carrick; Arthur M. Diamond, a New York state judge; and Frank Sanzillo, an Albany lobbyist whose brother Thomas later became Mr. Hevesi’s top deputy in the state comptroller’s office.

As chairman and chief executive of Curran & Connors, Mr. Morris tapped his political connections to get business, according to two of the firm’s former executives. Clients that Mr. Morris steered the company’s way included the campaigns of Mr. Schumer and two California Democrats: Ms. Feinstein and Representative Jane Harman. Mr. Morris was also credited with getting annual-report contracts with the New York City Housing Development Corporation in addition to the one with Bear Stearns, which was one of several Wall Street firms that underwrote municipal bond sales during Mr. Hevesi’s eight-year tenure as city comptroller that ended in 2001.

One former senior executive of Bear Stearns said Mr. Cayne, the former chief executive, had indicated that he wanted to go with Curran & Connors because of Mr. Morris’s political connections.

“The explanation was that he could be very helpful to us, that he was close to Hevesi and we needed to do this,” said the executive, who still works in the financial industry and did not want to be identified.

Mr. Cayne declined to talk to a reporter who reached him at his home.

As Mr. Hevesi was settling into the state comptroller’s office in 2003, Mr. Morris took another step that, prosecutors say, showed he was preparing to exploit the office’s sole authority over the state’s $122 billion public employee retirement fund. He obtained a securities broker’s license and became affiliated with Searle & Company, a small investment firm in Greenwich, Conn. How he came to work with Searle, which has a handful of employees and an office above a Christian Science reading room, is unclear. The company declined to comment.

As a placement agent, Mr. Morris embarked on three years of deal-making, in which he and a Hevesi aide, David Loglisci, extracted fees from private equity firms seeking to manage state pension investments in New York, according to the indictment brought by Mr. Cuomo and a related civil complaint by securities regulators. The two men are accused of requiring fund managers to pay a fee to Mr. Morris, who provided no legitimate services in return, if they wanted state business.

Although Mr. Morris began his pension brokering in New York — receiving fees from high-profile investment firms like the Quadrangle Group, then run by Steven Rattner, a Democratic fund-raiser and now one of President Obama’s auto-industry advisers — he soon took it on the road, working with a firm run by Daniel Weinstein, a Los Angeles placement agent active in Democratic politics.

Mr. Morris split fees from California and Los Angeles city pension investments with Mr. Weinstein’s firm, Wetherly Capital, in 2005 and 2006. Mr. Morris’s political consulting firm had worked for several California campaigns over the years, including a run for governor in 2006 by Phil Angelides, then the state treasurer, and the unsuccessful 2005 re-election bid of Mayor James Hahn of Los Angeles. Mr. Weinstein, whose clients include Ron Burkle, a major Democratic fund-raiser, has raised money for Mr. Hahn and Mr. Angelides.

On Tuesday, a former Wetherly employee, Julio Ramirez Jr., pleaded guilty to secretly sharing with Mr. Morris a portion of placement fees paid to Wetherly by fund mangers seeking New York state pension investments. Mr. Weinstein has not been accused of wrongdoing. Last week, Wetherly issued a statement saying the money it paid Mr. Morris for the California investments was a “standard professional services” fee for referring a client seeking business in that state. There was “no quid pro quo” between the firm’s New York and California deals, it said.

Mr. Morris funneled the fees he collected through a series of companies he created for that purpose, and his involvement in pension deals was often kept off the books, part of what prosecutors assert was a scheme to hide his role. Indeed, many longtime friends and colleagues say they had no clue about his placement-agent work.

Nor did Mr. Morris mention it during a January 2006 deposition in connection with the lawsuit brought by a former Curran & Connors employee. Asked about his other business activities, he emphasized his political consulting work.

At one point, explaining his management style, Mr. Morris said he tried to subject his conduct to something he called “the Rita test” — to be able to “look my mother in the eye and explain to her why I did that.”

Correction: May 18, 2009

An article on Thursday about ways in which the indictment of Hank Morris, a consultant and political operative from New York, has exposed the role of influential middlemen in the pension fund investment business misspelled the given name of a former senator from New York who was defeated in 1998 by Charles E. Schumer, for whom Mr. Morris worked. He is Alfonse M. D’Amato, not Alphonse.

Danny Hakim contributed reporting.

Danny Hakim contributed reporting.

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